Usual Suspects – “Nothing To See Here” – “When they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”

“January’s numbers are not a surprise. Some buyers may be sitting on the sideline waiting for a deflationary spiral to develop. When that doesn’t develop, when they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”
– Cameron Muir, chief economist for the B.C. Real Estate Association.

“January’s numbers suggest that there is a possibility the decline in sales should well flatten out.”
– Tsur Somerville, director of the centre for urban economics and real estate in the Sauder School of Business at the University of B.C.

“When a home seller isn’t receiving the kind of offers they want, there comes a point when they decide to either lower the price or remove the home from the market. Right now, it seems many home sellers are opting for the latter.”
– Eugen Klein, president of the Real Estate Board of Greater Vancouver

Above quotes from ‘Lower Mainland home sales continue downward trend’, Derrick Penner, Vancouver Sun, 5 Feb 2013

The tune doesn’t change, despite the substantial change in the backbeat.
Perhaps this is the first time that Muir has used the term ‘deflationary spiral’.
And, we’ll say it again: it’d be nice to see Sommerville at least sketch out a few alternative scenarios for the benefit of Vancouver citizens. The lack of critical analysis of this market from local academics remains one of our bubble’s most remarkable features.
– vreaa

46 responses to “Usual Suspects – “Nothing To See Here” – “When they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”

  1. “Some buyers may be sitting on the sideline waiting…”
    From what I gather, there’s about 5 of us. Sitting here with our briefcases full of cash.

    • That’s not how I picture myself. It’s more like sitting on a split rail fence wearing bib overalls and a straw hat, chewin’ and spittin’, making comments like “THAT’S gonna leave a mark!” when a deal with a particularly low sale to list price happens.

    • What’s so bad about renting? If I were lucky enough to be renting and did not buy, my potential downpayment (about 700,000) would be going into a mixture of ETFs/index funds, and equities, generating about 35K in dividends ALONE, about 3K a month (if you buy high dividend yielding companies like AT&T, Verizon), not counting on capital appreciation. Imagine if you had bought a 700K property in Vancouver with cash, do you think you can rent out a basement suite for close to 3K a month? If you say you save 1500 in rent a month, and rent out the basement for 900 bucks, you’re only “making” 2400 a month for your real estate investment, plus you have the hassle of finding a good tenant, dealing with his/her complaints, etc. Not to mention property taxes, maintenance, real estate transaction fees, etc. If I were renting, my wife and I would certainly not be paying 3K a month in rent. We could rent a 2BR some place for 1500, re-investing that extra 1500 bucks we make monthly in dividends and watching our money grow ever quickly.

      There is no question that with the rent/price ratio today in Vancouver, being a landlord and renting your place out, even if it’s a basement suite, is a losing proposition. And those multimillion dollar properties on the westside? Good luck trying to find someone to rent it out for 10-15K per month, which is what you probably need to rent it out for to cover all your expenses. Very few people make enough money to rent a place for that much in this city. It’s lose-lose either way.

  2. Tsur’s comments this time are disgusting. Very, very misleading, more so than usual.

  3. You’d figure Cameron Muir would get a brain…

    A real estate association does not exist to cheerlead for higher prices…. His primary concern should be transactions… because that’s how his members get paid.
    It’s almost like these guys’ egos are wrapped up in seeing how high real estate prices can go.
    Lower Prices = More Transactions = More Income for his members.

    • Actually, lower prices = less transactions in the short to mid term.

    • Supply and Demand would suggest otherwise. Then again, the real estate market here is so screwed up, normal laws of economics may not function in the short-term.

      • Decreasing prices will have a negative effect on buyers’ psychology and unless the government steps in, will lead to credit tightening. A big enough decrease will also increase the number of foreclosures and hoemoaners that would like to sell but can’t (this will also impact buyers’ psychology in a negative way).

    • With the price this detached from fundamentals, real estate is a Veblen good. Higher price = higher demand.

      • UBCghettodweller

        From Wikipedia:

        “In economics, a Veblen good is a member of a group of commodities for which people’s preference for buying them increases as their price increases (as greater price confers greater status) instead of decreasing according to the law of demand. A Veblen good is often also a positional good.”

        As much as some economics is just like psychology- they assign complex terms to simple and relatively common sense things- I wish I had studied both more when I was young. Practically more useful than my pharmacology and advanced OChem options.

    • That would mean admitting he has been wrong and has been misleading everyone. Instead he will slowly change his tune so that he can pretend he has been right all along

  4. Cute. Watching this from the States, one can’t help but picture kids wearing too-big-for-them suits, dispensing what they think is thoughtful advice.

  5. btw, surprised you haven’t highlighted this article yet – BC couple with a rental investment property that’s losing $1K/month! The rental property is assessed at higher value than the principle residence too!

  6. Same all , same all form RE cartel. The fact is…..some potential buyers have been on sitting since early 2000… they have all the time. It sucks to be a senior empty nester now….first they lost cash in mutual funds RRSP back in the ’90,then made next to nothing in GIC/RRSP and now facing price reductions if they have to sell ( and yes, some of them will not be able to live in the house after the age of 65). The fact is renters are doing just fine and most is able to save cash every month…..while most homeowners don’t.

  7. “They’ll get on with their lives”

    So smug and condescending.

    • I thought “get on with their lives” sounded rude too. Since when does getting on with your life mean buying overpriced real estate and committing yourself to a life time of debt? What about the sellers who aren’t selling until the market picks up? When they see prices continue to fall through the spring, maybe some of the sellers will “get on with their lives” and sell their houses before they depreciate any further!

      • Because not buying is putting your life on hold.

      • Yest, why wouldn’t they comment that it is a time for the seller to adjust the expectations and to price accordingly – and to get on with their lives? Their very close alignment with the seller’s interest just shows how deep all 3 of them are personally affected/invested in RE – and it is really a screaming conflict of interests for the industry they are in – I hope they loose the seats they are in soon.
        Yes, falling prices will reduce the demand temporarily but just until the prices meet the buyer’s ability to get financing – the US market proves it.

      • UBCghettodweller

        “Because not buying is putting your life on hold.”

        I’ve actually heard that line from an relative a while back. I said nothing since I didn’t want to ruin what was an otherwise excellent turducken-based family dinner.

        moral of the story: turducken is awesome.

    • Ya, that comment doesn’t exactly encourage me to want to buy. Why is the chief economist trying to act as a sales man? He’s doing a poor job.

    • “they’ll get on with their lives and move on with purchasing decisions.””

      If I don’t see significant price declines I’ll “get on with my life” and continue renting & saving as I have been for years.

    • Maybe he means “move away” ?

  8. My old realtor is still emailing me imploring me to buy. (She doesn’t know I had already bought one property without her.) She keeps sending me listings, now’s a good time, etc. Thing is, I’m happy where I am (did not overstretch myself), and my money is going into other investments that are actually growing, whereas real estate is stagnating or decreasing or crashing. I’m really not interested in buying any more. This house will be paid off in a few years time and I’m sure it will drop, but I’m building equity elsewhere.

    I’m sure smart renters are also investing their potential down payment somewhere else. No stigma to being a renter. Although I am an owner, I am a reluctant one, and wouldn’t have bought were it not for family. If prices keep going up, then continue to rent, and just use the downpayment you would’ve used to buy a property to invest elsewhere. If they drop, wait until a 70% drop until you get into the market.

  9. Cam Muir’s line is an odd one. Luckily few listen; it must be frustrating when the exact time one needs another to listen, they are impermeable.

  10. From some of his recent posts, I know Tsur looks at dollar volume and probably realizes that overall sales volume looks to be continually contracting in the double-digits — a free fall call it. That’s the worst case scenario (more so for banks and insurers) that becomes exacerbated by sellers not reducing prices to meet demand. How many sellers will opt-in to lose money or can afford to reduce prices? Not many. And for this reason they are more likely to wait, putting them in a far worse situation later on.

    • “Those of us involved in the real estate profession find ourselves in the awkward position of favoring price softening. REALTORS are asking (pleading) sellers to accept market realities and reduce their listing price. And it is important to remember that the true measure of health in a nation’s housing markets is sales growth, not price appreciation.” — David Lereah, chief economist at the US NAR in the fall of 2006

      • You bet Ralph, but that was one year after this happened exposing the entire fraud on artificially inflated home prices.


        Look familiar?

        Competition Bureau Sues Canada’s Largest Real Estate Board for Denying Services Over the Internet Link

        Forget prices. When this entire market turns and all the fraud is exposed, yes, REALTORS will be begging sellers to reduce prices.

    • These guys do seem to fixate on prices. Agree Watchdog. At the moment there is the appearance of price stability despite what we can only term a crash in sales numbers.

      When looked at in terms of the gross cost to buy though the numbers they use paint a picture of a market that is benign. “Looks pretty safe to us” is their mantra, even as buyers take cover by the thousands and sellers retreat into the bunkers of their self induced price fantasies.

      Some Realtors have been calling this dynamic a tug-of-war, a standoff or a stalemate in the market. That is also a bit of a manipulation of words. Those words imply that the market could go either way when in fact it can only decline as sellers retreat in large numbers.

      By underplaying the significance of the sales declines these guys are able to paint a picture of a market in balance. Anyone not familiar with how the floor can drop out from under home prices in this scenario might easily be misled into thinking everything is A-OK.

      The Wily Coyote analogy is suitable here for as long as we have suspended belief that we have already gone off the cliff and it is just a matter of time before we hit ground.

  11. Real Estate Tsunami

    Someone mentioned in a post some time back that The Tsur owns property in Vancouver West.
    If this is true, than he should disclose this, exposing his bias.

  12. Sounds like three guys saying whatever it takes to keep their jobs that are based on an industry dreading over a cliff; like a junior oil producer always calling for higher oil prices…

  13. the poster formerly known as anonymous

    This “getting on with their lives and buying” thing reminds me of a project I have been thinking of a while. I have submitted a handful of anecdotes over the past two years about people and the actions they took or the opinions they expressed. When I have the time, I will dig them up from the archives and do a “Where Are They Now?” series with updates on their situations.

  14. See no evil, hear no evil, speak no evil.

    There is something rather simian about the manner in which the usual suspects insist on one thing, and one thing only.

  15. The Poster Formerly Known As Anonymous

    Haha! Simian! One of the associate “Usual”s, (s)Cam (u) Goode, has a “Simian” as a pet.

    (Trying not to stray into Ad Hominem territory here… I think ad nominem is ok, right?) But, I still remember when Nem thought Simeon Garratt’s handle was just somebody playing around with words, and came up with “Monkey Chokehold”. Hahaha! Simian Garrotte! It still makes me laugh. I am so juvenile sometimes.

    And no offense intended to parties named. It was just a funny misplaced reverse-engineering of wordplay that wasn’t.

    [Sorry if no one else knows what I am talking about.]

    • TeeHee! Ya know, TPFKAA… I really did think Simeon’s InterWebMoniker was an obscure joke… And then, “Damn!”… there he was in the ID Parade!… Hauled in by Vancouver’s finest together with a Paddy’s worth of other lapsed Realtors™ caught aggressively panhandling prospective vendors… [MPAA: NC17 / NSFW]

    • I have no idea what you are talking about but it was hilarious.

  16. Got a few laughs out of this. To be honest, I was surprised we did not see more of this.

    And to those wondering why Family Day is on Feb 11…

    • Yes just like how plane loads of Chinese were supposed to come over to buy last year because it was the year of the dragon. Realtors are so desperate it’s funny. Throwing a party that no one is coming to. How sad.

    • 4SlicesofCheese

      That photo would be like if a Chinese politician wore one of those fake tuxedo t-shirts and surrounded themselves with Caucasian people trying to be “one of the them” to promote western ties.

      • Sorry, here is the updated photo…

        Maybe she’ll post one of herself handing out free money on Chinese New Years…umm, I mean on “Family Day” 😉

      • and speak of the devil…here she is giving away money (ahem…I mean “campaigning”) at Aberdeen Mall on the weekend. Like shooting fish in a barrel…

        If elected, she’ll have a tough decision to make for next year. Will Family Day fall on Jan 31 or Feb 3? Or will she forget about politics, come to her senses and make it on Feb 17 to coincide with everyone else in Canada? What say yea, Naked Official #9000?

        Chinese New Year

  17. pffft! … allow myself to deceive myself …

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